search antimuluzi.blogspot.com

Friday, October 31, 2008

World Bank --Malawi has a better chance than ever before to accelerate economicgrowth! A team of development partners and the Government arecollaborating in carrying out analytical work to establish a basis forpolicy options that will help Malawi build on recent gains in growthand economic management. These policy recommendations for economicgrowth will be delivered early in 2009 in what is called a CountryEconomic Memorandum (CEM).

Since 2006 Malawi has had remarkablegrowth rates averaging 7.5 per cent, compared to an average of aboutthree percent during the early years of the decade. The projection for2008 is for 8.7 percent growth. Growth is good. It increases wealth andincome, which in turn help alleviate poverty.

The team ofdevelopment partners working on the CEM includes the AfricanDevelopment Bank (AfDB), the UK’s Department for InternationalDevelopment (DFID), the Millennium Challenge Corporation (MCC) and theWorld Bank (WB). The Ministry of Finance is leading Government teams inthe CEM work, with the Ministry of Economic Planning and Developmentand the Reserve Bank of Malawi as key local partners.

“Theoverarching focus of the CEM will be on providing advice on putting inplace a policy and institutional environment collaborated withsupportive expenditure programs that will enable the continuation andeven acceleration of the current strong growth momentum throughtrade,” says Jos Verbeek, the World Bank’s lead economist for Malawi.

Toachieve its objective, the CEM will review the current sources ofgrowth, the policy actions that led to the growth, and the role thattrade has played. It will also suggest how the current growth can besustained through either intensifying what is already happening ordiversifying the sources of growth.

Growth is the mostdesirable source of additional public resources. Given that howgovernment spends these additional resources is important for growth,the CEM will also provide useful insights to the Government and otherinterested partners on how best to use any additional revenue tosustain if not accelerate Malawi's growth spurt.

Government islooking forward to the CEM. “It will help us further operationalize theMalawi Growth and Development Strategy by assisting with theprioritization of those policy actions and expenditure programs thatwill have the biggest impact on growth, and hence poverty reduction,”said Randson Mwadiwa, secretary to the treasury at the Ministry of Finance.

Growth through trade

The CEM is aptly titled Seizing Opportunities for Growth through Trade.

TheMalawi Growth and Development Strategy (MGDS) (2006-2011) aspires forthe transformation of the economy, from being predominantly importingand consuming, to being predominantly manufacturing and exporting.Trade is key to the fulfillment of this vision. Trading and retailingactivities account for a significant part of the distribution sector.It is estimated that approximately 22 percent of Malawi's GDP comesfrom the distribution sector. For Malawi to sustain high growth rates,it will have to trade more.

“We believe the way out of poverty isthrough growth and trade,” says Lucia Hanmer, a DFID senior economicadvisor. “Successful strategies for growth and trade are ones that areattuned to country circumstances.”

So, in order to recommend whatcan help Malawi’s growth improve and be more sustainable through trade,the CEM team will focus on establishing the extent of potential forMalawi to expand its non-traditional exports, and identifying theconstraints that need to be removed in order to exploit this potential.The hypothesis is that market access might not be a binding constraint,given that Malawi is currently not fully utilizing existingpreferential trade arrangements. Therefore, Malawi needs to look atother factors that could be preventing expansion of non-traditionalexports, such as production related constraints (including lack ofscale economies, inability to meet quality standards, energyconstraints) and marketing costs (including high transportation costs,border related costs, and limited information about available markets).Further, given the long distances to Malawi’s overseas markets, tradewith regional partners will be critical.

The role of infrastructure

Keyto trade is transport infrastructure. The MGDS recognises that Malawi’spoor infrastructure limits the country’s productivity and affectsinternal and external trade efficiency. At 53 percent of export valuein 2007, transport costs remain high compared to other countries in theregion.

“Reducing trade logistic cost inside as well as outsideMalawi's border is critical to bring down the high trade logistic costof Malawi's exports and make Malawi more competitive regionally as wellas globally,” says Joao Mabombo, the AfDB’s infrastructure specialist.

TheCEM will outline the status of internal and regional transportinfrastructure within the development corridor framework, and identifykey constraints in the transport sector that if addressed can spureconomic growth. Using GPS technology, the CEM team is also identifyingwhere in Malawi public investment could have the biggest impact onprivate activities and thus, growth.

Agriculture as a key sector driving growth

Agriculturegenerates over 90 percent of export earnings and 35-40 percent of GDPin Malawi. It is the main source of livelihood for the majority ofMalawians, most of who are smallholder farmers living in rural areas. A preliminary analysis of the sources of growth shows that agriculturehas been one of the main drivers of high real growth rates registeredsince 2006, although much of this growth represents a re-bounding ofthe sector’s performance following a severe drought in 2005. Theanalysis further shows that productivity in the sector remains lowwhich implies that there is still great potential for agriculture tocontinue driving growth in Malawi. The sector is therefore receivingparticular attention in the CEM work.

In 2007, the mainagricultural commodities with positive volume growth were tobacco (53percent), sugar (nine percent), tea (nine percent), cotton (threepercent) and edible nuts (four percent). The CEM will assess thecountry’s competitiveness in key agricultural commodities so as toprovide evidence on the potential investments and policies needed toimprove and sustain higher growth in the sector. Two complementaryanalytical approaches are being used to achieve this: (i) quantitativevalue-chain analysis of selected commodities (ii) a detailed constraintanalysis to identify key challenges affecting Malawi’s agriculturalcompetitiveness.

Partnership behind CEM

In the spirit of the Paris Declaration, development partners are collaborating on the CEM.

“Workingtogether is helping to build a shared understanding of what constrainsgrowth in Malawi,” said DFID’s Growth Team Leader David Woolnough.“Supporting the government, we can use this knowledge to support futuregrowth and ensure the economy goes from strength to strength.”

Thedevelopment partners are so far applauding the collaboration as beinghighly positive in bringing together thinking and ideas from a numberof individuals with different experience and skills, particularlyaround new approaches to growth and growth diagnostics.

“We donot believe in duplicating efforts, but in taking advantage of the poolof knowledge that is available here and abroad,” said the MCC’s AlexGomani.

The experts from the donor institutions arepartnering in producing the key sections of the CEM according to theirexpertise. DFID and the World Bank are working on the first section ongeneral economic environment supportive of growth. All the partners arecontributing to the second section on general cross-cutting economicpolicies to broaden and sustain economic growth; as well as analyzingissues of trade (WB, DFID, AfDB), infrastructure (WB, AfDB), and thefinancial sector (WB, RBM) in a growing economy. The third sectionlooks at the most promising sectors that can broaden growth mainlyagriculture and other high potential sectors such as agro-processingand manufacturing in general (WB). The final section will analyze howall the issues raised in the different sections fit together in orderto make policy and strategy recommendations to the Government on how itcan sustain and build on the current growth momentum.

Popular Posts

Bakili Muluzi Quotes

" I am a good dictator who wants to maintain peace and stability in my country "

Speaking when the High Court of Malawi declared unconstitutional President Muluzi's ban on demonstrations against the controversial presidential third-term debate, but the head of state said he would ignore the ruling.

The Real Bakili Muluzi

Bakili Muluzi, the man with no objective and vision to lead the country, his 10 year track record speaks for itself.

Bakili Muluzi the man manipulating poor Malawians with handouts from money he is yet to account for

Bakili Muluzi the man who puts his private UDF party before the Republic's interests

Bakili Muluzi, the man who has questionable and controversial associates in the history of Malawi politics

Bakili Muluzi the man who wants to be life president of Malawi

Bakili Muluzi the worst performing president ever to be elected in the history of Malawi

Bakili Muluzi, the man who thinks he can buy his way out of everything in Malawi politics including the Presidency

Bakili Muluzi, the man who promised free shoes to the electorate who up to now has not delivered on his promise not to mention the other countless promises he lied to the Malawian people during his tenure

Bakili Muluzi, the man who has run the UDF party as a personal entity for 15 long years

His intentions to rule for life were the same in 2004 when his tenure finished and are the same today in 2008

Bakili Muluzi, the man who takes Malawi and the Malawian people for a joke